1. Consider the following values of the price elasticity of demand: || Cigarettes U.S. luxury cars in the U.S. Foreign luxury cars in the U.S. 0.5 1.9 2.8 Based on these values, provide an estimate of the impact on revenues of a 10% increase in the price of each of the above three products. (Hint: You are asked whether the revenues will increase or decrease and by what percentage. Mathematically, you want to calculate (AR/R) / (Ap/p), or equivalently, (dR/dp)·(p/R). Also, keep in mind that R(p) =p•Q(p). Once you carry out the calculation, the answers are straightforward.)

1. Consider the following values of the price elasticity of demand: || Cigarettes U.S. luxury cars in the U.S. Foreign luxury cars in the U.S. 0.5 1.9 2.8 Based on these values, provide an estimate of the impact on revenues of a 10% increase in the price of each of the above three products. (Hint: You are asked whether the revenues will increase or decrease and by what percentage. Mathematically, you want to calculate (AR/R) / (Ap/p), or equivalently, (dR/dp)·(p/R). Also, keep in mind that R(p) =p•Q(p). Once you carry out the calculation, the answers are straightforward.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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